If you read my REI Club blog post “Invest In Apartment Buildings To Retire Early”, you were probably saying to yourself, “That’s great, Michael, I’ll just keep buying as many units as I need, and then I’ll be set. But I don’t really have the money for all this.”
This is a good objection, but only because you don’t know any better!
The truth is, you don’t need a ton of your own money or even good credit to get started with buying apartment buildings. The answer is to raise money from private individuals.
The process of putting together deals with other people’s money is called “syndication”.
Why is this a good idea?
What Is Syndication of Real Estate Deals?
First, if you have money from other people, you don’t need your own. This means you can do as many deals as you want.
This also means you can do bigger deals.
Even if you could afford to buy a 10-unit building with your own cash, why not go after a 50-unit building and raise money from people you already know (or will know in the future by talking to the people you already know)?
The third reason syndicating deals is good is that you now have a third pair of eyes on your deal.
Richard Feynman, the famous physicist, once said that “the first principle is that you must not fool yourself and you are the easiest person to fool.” When you’re using your own money, no one else is looking over your shoulder, and you’re more likely to make mistakes. If you can convince others to invest in your deal, chances are, you actually have a good deal.
There are negatives to syndicating deals because you’re splitting profits with other people
But isn’t 30% of something better than 100% of nothing?
The second objection I hear is that you would lose control. That does not have to be true. It all depends on how you structure the “partnership” with your investors. You can make your investors completely silent if you want.
The final objection is that people tell me they don’t know how to go about raising money. That is a valid concern but beyond the scope of this article. I will write some articles on this subject, so this won’t be an excuse for long -;)
I always say “where there’s a will, there’s a way”. My objective with this article is to show you why you should strongly consider syndicating deals.
While there are many possible objections to considering syndication, most of those objections arise because people are not familiar with syndication. One of my goals, in addition to teaching others to buy apartment buildings, is to also teach others to raise money from private individuals. If you do, you can greatly accelerate your financial goals!